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How do I forecast revenue for a service or professional-services firm?
Build it from drivers: capacity (billable staff and hours), utilisation, rates, and the sales pipeline weighted by historical conversion and timing, plus recurring contracts. This is usually more reliable than extrapolating past revenue, because work is constrained by people and driven by deals, not just seasonality.
Split revenue into recurring or contracted, probable from pipeline, and speculative. Apply stage-based win rates from your own history instead of guesses, and include expected delays between winning and billing.
Check capacity: a forecast that exceeds what staff can deliver is unrealistic. Track utilisation, write-offs and payment delays, since they affect cash as well as revenue. Review forecast versus actual monthly and refine win rates and timing.
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